:
1.
The British banking sector has become an organised criminal enterprise which
has been allowed to develop because of the criminogenic environment in which it
functions, which has resulted from the absence of any meaningful regulation
which those who control and manage the banks would fear.
2.
In this organised criminal category I include the various mis-selling cases,
including pensions, PPI Insurance and interest rate swap derivatives; the
criminal manipulation by Barclays and other banks of the LIBOR interest rate
structures; the institutionalised level of money laundering as identified in
the HSBC case; the serial abuse of the US sanctions provisions as indicated in
the Standard Chartered Bank case; as well as many other examples of criminal
actions such as theft of client funds, teeming and lading, abuse of client
instructions, insider dealing, front running, churning, and market manipulation
which have become the subject of international regulatory interventions.
From the beginning...
This is the first tranche of the evidence I submitted to the Parliamentary Commission on Banking, and which their Government Servants attempted to suppress. The other two tranches will be published in the following days.
Response to the Parliamentary Commission on Banking Standards
Professional standards and culture of the UK
banking sector
Rowan Bosworth-Davies M.A
The views and opinions expressed in this paper
are entirely those of the author and reflect no other agency, department or
company.
Summary
·
This paper makes the assertion that the British Banking Industry has become
identical with an Organised Criminal Enterprise.
·
It examines the nature of the criminogenic personality and determines the kind
of person who is more likely to break the criminal law and why.
·
It asserts that this state of affairs has been allowed to develop because of
the failure of the regulatory process to develop the necessary skills and
knowledge of the conduct of criminals to enable them to deal professionally
with the misdeeds of the banking sector and the reluctance of the regulators to
use their statutory powers effectively.
·
It defines why there needs to be a far greater degree of criminal prosecution
brought against financial practitioners and explains why such processes are
among the only penalties that such practitioners truly fear.
Definitions of
Organised Crime
"...Organised
crime is a structure that includes two or more people whose purpose is to
commit one or more serious crimes or offences for financial gain or material
benefit..." (Australia)
"...It is
serious crime planned and carried out by a group of at least three people to
benefit one or more members of the group...! (Canada)
"...Organised
crime constitutes any enterprise, or group of persons, engaged in continuing
illegal activities which has as its primary purpose the generation of profits,
irrespective of national boundaries... (UK)
1.
The British banking sector has become an organised criminal enterprise which
has been allowed to develop because of the criminogenic environment in which it
functions, which has resulted from the absence of any meaningful regulation
which those who control and manage the banks would fear.
2.
In this organised criminal category I include the various mis-selling cases,
including pensions, PPI Insurance and interest rate swap derivatives; the
criminal manipulation by Barclays and other banks of the LIBOR interest rate
structures; the institutionalised level of money laundering as identified in
the HSBC case; the serial abuse of the US sanctions provisions as indicated in
the Standard Chartered Bank case; as well as many other examples of criminal
actions such as theft of client funds, teeming and lading, abuse of client
instructions, insider dealing, front running, churning, and market manipulation
which have become the subject of international regulatory interventions.
3.
If the recent financial devastation in UK financial markets has taught us
anything, one qualifier stands out above all the rest of the explanations. The
effective ‘regulation’ of the market in financial services in the United
Kingdom, particularly in the areas of preventing and forestalling commercial
activity which has the capability to undermine the well-being of the financial
market, in which I include not only financial criminality and money laundering,
but also the pro-active identification and prevention of financial damage
has, to all intents and purposes, totally failed.
4.
It has failed despite the huge bureaucratic organisation which has been
created for its control, because those who are employed to provide the
regulatory oversight of the market, the Lead Regulator, the Financial Services
Authority, and the subordinate compliance officers within the individual
regulated member firms, do not and have never understood the true nature of the
criminogenic personality of so many of those who profess the trade of financial
practitioner, nor do they exhibit any great inclination to wish to deal with
the egregious activities of these individuals in a 'policing' manner.
The Anomie of Affluence and the Legitimation
of
Deviancy - Towards a theory of Criminogenisis.
5. Much of the trading activity which takes place within the banking environment,
particularly in the area of proprietory trading is literally no different from
gambling on horse races or games of chance and its practitioners tend, generally,
to possess the same commercial mentality as the gambler.
6. At the same time, both floor and desk market professionals tend to
be heavily influenced by a trading culture which preaches the virtues of adopting
a grossed-out, high profiled, risk-taking personality, which needs to be
constantly attested to..
7. Psychologically, many of these men and women can be defined as being
'regulatorily resistant'. Theirs is a primarily deviant, norm- evasive,
criminogenic culture, not much given to the willing acceptance of regulatory
control. Such an uncompromising statement should not be immediately interpreted
to mean that these practitioners are committing wholesale overt criminal acts.
It simply means that their risk- taking culture, itself the antithesis of the
traditional perception of the risk-reduction function of these markets; coupled
with the highly competitive environment within which they work, whose new
traditions give all the impression of flouting traditional, 'old market' norms;
Which predispose
them to break the rules more readily than practitioners in other commercial
sectors. These are the traders to whom the compliance officer is
generally seen as 'the business prevention officer' and the traders tend to
view each new regulatory notice as an irritating inconvenience standing
in the way of increasingly innovative trading.
Each new regulatory
requirement is looked upon as a challenge to the ingenuity of the traders, and
competitions are held by dealers to see who can get round the controls
undiscovered, and in the most profitable manner. In his article, 'Mavericks at
the Casino: Legal and Ethical Indeterminancy in the Financial Markets',
Christopher Stanley identified the development of this new phenomenon of
regulatory resistance within the previously ordered environment of the City of
London.
8. ' The New City reflected the ideological aspirations of a
system of political administrations which disrupted the post-war
consensus of relations between polity and economy. It also reflected the
Casino or Disorganisation of Capitalism: 'an international financial system in
which gamblers in the casino have got out of hand'. The New City was international,
technological and subscribed to the Enterprise Culture ethos which placed
individual success and self-reliance as the primary indicators of excellence. The structural
changes which the Government introduced, in terms of trading practice and
regulation, operated with the new financial products and markets to ensure that
the particular elite of the Old City, which was perceived as a dangerously
destabilising hegemonic counterforce as a result of the tension between Establishment
and Disestablishment, was dislodged in the face of externally imposed
change. Thus settled norms of conduct were open to disruption'.
9. Pursuing the 'Legitimation of Deviancy'
theory, Stanley drew upon the concepts of the 'Anomie of Affluence'
to attempt 'explanations in this formulation of individual conduct within this
particular field of moral and economic deregulation.' He posited a vision
of a market in which money no longer possessed any intrinsic value as a
benchmark of the underlying value of the commodity traded, but became a
'free-floating signifier detached from the real processes to which it
once referred...there is therefore a transition in its nature as a
commodity to which moral or ethical values can be attached. In addition
the artificiality of electronic money enabled the further disappearance of the
victim and the possibility of justification through reference to prevailing
economic rationality, ie 'Greed is Good'.
10.This specific
problem of ‘regulatory resistance’ has been endemic in the regulatory model of
the UK’s financial sector since the passing of the Financial
Services Act 1986. In this presentation, one of my areas of focus is to attempt
to expand and develop the concept of the ‘criminogenic’ nature of the state of
regulatory resistance, or ‘legitimised deviancy’ which so many financial
practitioners espouse. By ‘criminogenic’ I mean conduct or behavior which has
the potential to become criminal, or at least, so vitally damaging at
some stage in the process, that any attempts to deal with the problem
will almost inevitably lead to further potential criminal behaviour.
11.By examining the
behavior and conduct of persons within the financial sector, we can establish
traits which indicate a potential to be more or less willing to engage in
conduct or behavior which may result in the commission of criminogenic
activity. Alternatively, where, through ignorance of the underlying
criminogenic potential of new products or sales practices, those employed to
‘apply compliance procedures’ in the market ignore the likelihood of the new
risks being generated. In so doing, they allow the damaging conduct to
continue, and in examining this conduct, we can begin to determine where they
are exposing the market to far greater systemic risk than it either needs or
can cope with.
12.A derivatives trader
who habitually spends his evenings spending vast amounts of his firm’s
money entertaining clients in lap-dancing clubs, the kind of man who is willing
to pay the bill for confirmed criminal offences, ie hiring prostitutes
(supplying prostitution) and supplying recreational narcotics, is not the
kind of man who is going to spend too long worrying about the finer niceties of
the Insider Dealing rules or money laundering regulations.
13.‘As long as we
got results, as long as we got our commission and good feedback from the
clients, they (the employing bank) didn’t really give a shit…I think the
banks know the situation, and so they don’t do the random drug tests,
because they know half their staff would be on it, and they
know that in a high-pressure job, they have to allow their traders to have
these excesses. They don’t care about the health of their workforce
as long as they’re making money…’ (Seth Freedman)
14.‘ …prompted by
the beckoning finger from the clearly coked-up Asian chick nearest the
open door, I nervously walked towards the car. I clumsily shuffled into my seat
and saw in the gloom my three colleagues all sitting with their respective new
lady-friends. They were all snorting yet more lines of cocaine that our
ever-so-thoughtful hosts had prepared for us on little mirrors…’ (Geraint
Anderson)
15.The basis of the
underlying theory is a concept which is well-known to any experienced
street detective who is trained to deal with crime and to recognize the signs
of the criminogenic personality, and briefly put, states that those
who act or behave in an anomic fashion in their ordinary, every-day existence,
who bend or break minor rules or simple laws for their own self-gratification,
or who refuse to conform to ordinary norms of human conduct at times when their
surrounding conditions would require
such behaviour, will have a greater propensity to act in a similar, anomic
way in many other circumstances, and where a situation arises which gives
them a series of choices, they will inevitably take the line of least
resistance.
16.James Q Wilson
has alluded to this kind of ‘behavioural arbitrage’ when defining his
“broken windows” theory of criminal conduct. Those who are
prepared to commit minor acts of criminal activity as a matter of course, have
little difficulty in committing more serious acts of criminality when occasion
demands. The pro-active policing policy therefore is not to ignore
but to focus attention on the immediate minor offences, because in many cases,
they will lead on to evidence of more and greater criminality.
To be
continued.......................
banzai7
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